Natural Resources Committee on Feb. 28th, 2022

[The Chair, Liberal, John Aldag]

Good afternoon, everyone. I call this meeting to order.

Welcome to meeting number nine of the House of Commons Standing Committee on Natural Resources.

Pursuant to Standing Order 108(2), the committee is continuing its study of a greenhouse gas emissions cap for the oil and gas sector. Today is our fifth of eight meetings with witnesses for this study.

Today's meeting is taking place in a hybrid format pursuant to the House order of November 25, 2021. Members are attending in person in the room or remotely using the Zoom application. Please note that the webcast will always show the person speaking rather than the entire committee. I'd like to take this opportunity to remind all participants that screenshots or taking photos of your screen are not permitted now that we are in session. Today's proceedings will be televised and made available via the House of Commons website.

I think we have all been here enough times to know the health and safety information. Basically, we ask people to keep their face masks on if they're not speaking. For the members and anyone else who is here, please remain masked up.

For our witnesses, because you're new here, I'll go through a bit of information for each of you.

To ensure an orderly meeting, I'd like to outline a few quick rules to follow. Interpretation services are available for this meeting. You have the choice at the bottom of your screen of floor, English or French. Members and witnesses may speak in the official language of their choice. Because of the translation services, we don't want to speak too quickly. Go at a normal pace and allow for the occasional pause in your statements so that the interpreters can keep up. That way, we can make sure that all of our members and those watching can participate fairly in their official language of choice.

For members in the room, raise your hand and I'll try to work with the clerk to decide a speaking order, both from within the room and on the screen. If you're on Zoom, please use the “raise hand” function and you'll be placed in order. We will do our best to make sure that we are as fair in recognizing the speakers as we can be.

Before speaking, please wait until I recognize you by name. If you're on Zoom, please click on the microphone to unmute your microphone. For members in the room, our team here will look after you. When you're not speaking, your mike should be on mute. I would remind you that all comments by members and witnesses should be addressed through the chair.

For today, on our study of greenhouse gas emissions cap for the oil and gas sector, I'd like to welcome our witnesses.

Appearing as individuals, we have David Keith, professor of public policy at Harvard Kennedy School; Andrew Leach, associate professor at the University of Alberta; and Jennifer Winter, associate professor at the University of Calgary.

From Environmental Defence Canada, we have Julia Levin, senior climate and energy program manager, and Dale Marshall, manager of the national climate program.

From the TC Energy Corporation, we have Robert Tarvydas, vice-president of regulatory strategy, and Christopher Vivone, director of federal government relations.

From the Trottier Energy Institute, we have Simon Langlois-Bertrand, research associate.

Each of the groups will be given five minutes for an opening statement. I have a handy timekeeping system. When you have 30 seconds left, I'll show you the yellow card. When your time is up, I'll show the red card. Don't stop mid-sentence, but wind up within a sentence or two. That applies when we're going through the rounds of questions as well, so that each of the members has their chance to interact with our esteemed panellists who are with us today.

With that, I will get my clock ready. We're going to the three individuals first for their five-minute opening statements.

We will start with Mr. Keith.

I will turn it over to you. You have five minutes.

[Dr. David Keith, Professor of Public Policy, Harvard Kennedy School, As an Individual]

Thank you very much for inviting me to speak.

First are some sound reasons to oppose a cap. Every tonne of carbon is equally bad for the climate, so why pick on the oil and gas industry emissions for a hard cap? The point, the entire point, of Canada's impressive carbon pricing scheme is to let the market find the cheapest and best ways to save tonnes rather than having the market be in the business of micromanaging individual sectors. We don't have a cap on Internet or air travel, so why oil and gas?

Yet I am in favour of a hard cap. My rationale rests on concerns about Alberta's and Canada's economic future in a carbon constrained world.

The climate is getting a much higher level of political attention at the top levels of major governments in a way that's really different from any time in the whole 30 years that I've focused my career on climate change. The world will not cut emissions as fast as environmentalists like me want, but they will be cut. Oil demand will peak and it will decline. The technology for accessing tight oil, fracking, will spread, putting a long-term restraint on prices and making Canada's oil, with its comparatively high upstream emission, relatively less competitive.

Even with war today, sadly, oil is 25% below its inflation adjusted price peak and futures point lower suggesting the market sees this as a blip.

I moved to Alberta from Pittsburgh. I've seen what a crash looks like. I've seen what it does to people. As an Albertan, one who wants to see good jobs for my children and my friends, including many friends in the oil patch, my judgment is that digging the economy deeper into oil and gas will just make the crash harder.

It's easy money now that we buy at the price of our children's economic future and of the planet's climate future. My hope is that government sends a clear message, a message that drives private ingenuity and investment away from oil and gas and towards new businesses that can harness Alberta and Canada's brain power, its engineering strength, its engineering services sector to develop new value-added businesses that can thrive in a world as oil and gas decline under a carbon constraint.

Some hope that a cap will drive investment in cutting emissions in upstream oil and gas. Even in some sense that's its formal purpose. It may. But despite serving years ago on the five person federal panel that recommended some of the key carbon capture and storage investments in Alberta, I hope that little effort is put into reducing upstream emissions. Doing so will just sink more money into cutting those emissions, and that can't in the long run secure Alberta's or Canada's economic future. It may divert money from other investments, so increasing our dependence on oil and gas.

After all, eliminating upstream emissions can only eliminate about a fifth of the overall emissions from the life cycle of oil and gas use. Most emissions come when the product is burned. The problem is the product, not the process of making it. That is the essential reason why Alberta and Canada must look beyond the oil and gas sector.

If we want a stable climate, we can't keep putting CO2 in the atmosphere. We can argue about how quickly the transition needs to be there and there are legitimately different views, but we will have to stop.

I urge you to move towards a stringent cap on upstream oil and gas emissions both to protect the climate and because it is in the long-run interests of Albertans and other Canadians whose economies are tied to oil and gas.

Of course, people with short-run interests in the current system, the fossil fuel party, will argue the contrary, but theirs are not the only legitimate voices in Alberta.

Thank you very much.

[The Chair, Liberal, John Aldag]

Thank you for your opening comments. It was just under the clock. We appreciate it. That gives us lots of time for the next opening statement.

Mr. Leach, we will turn to you for your five minutes.

[Dr. Andrew Leach, Associate Professor, University of Alberta, As an Individual]

Thank you very much.

Thank you for inviting me today. I'm pleased to be here to speak to you about this very important issue.

Canada will undoubtedly require more stringent policies to meet its commitments, its international and domestic commitments, to reduce emissions. I strongly support and have worked on the implementation of these policies, but with that in mind, I'm not convinced that a regulatory cap on emissions from the oil and gas sector is needed.

A sector-wide declining cap on emissions could represent a financial, technical and constitutional challenge, and lead to less cost-effective emissions reductions attributable to Canadian policies.

The oil and gas sector is Canada's largest emitting sector. Oil and gas production accounted for 191 megatonnes in our last inventory year of 2019, which is just slightly more than the 186 megatonnes that we measured for transportation. Importantly, forecasts show that these emissions are unlikely to decrease meaningfully unless more stringent policies are imposed.

There should be no question that oil and gas production contributes substantially to Canada's emissions. As Professor Keith so eloquently said, the emissions embodied in Canadian hydrocarbon production are a significant source of global emissions. Absent significant decreases in emissions from the oil and gas sector, Canada's goals will become increasingly challenging and eventually, for all intents and purposes, impossible to meet.

When you say something like that, a lot of times people will respond and say that the emissions intensity has been improving. I'd like to point out that this is not consistently true. The average Canadian barrel of oil has become more emissions intensive over the past three decades. The reason for that is simple. More of our barrels are coming from the more emissions-intensive oil sands. More of those oil sands barrels are produced using more emissions-intensive in situ processes. Within individual sectors the stories have been good, but overall there is not as much to sing about as some might have you believe.

The story is slightly better for natural gas, but there we only see a slight long-term decrease in emissions intensity.

What's driving this story? We know that the biggest driver for production and thus for emissions in the oil and gas sector are factors beyond our own borders, like commodity prices. Commodity prices are influenced by everything from technology to global development to the war that we've all been talking about these last few days.

High prices will generally mean more willingness to invest to maintain production in spite of carbon policy changes, but that type of analysis begs the question of whether oil prices, combined with carbon pricing and with a regulatory cap on emissions are going to lead, as Professor Keith said, to sufficient investment to decouple emissions from production.

My belief, like his, is that this is unlikely to happen, perhaps for a slightly different reason. Echoing some recent statements from industry leaders, there's just not enough long-term certainty on the policy side. There are some measures that can close this gap, like tax credits, etc., but a regulatory cap doesn't get you farther towards that goal.

The next thing I'd point out is that, in arguing for the Greenhouse Gas Pollution Pricing Act before the Supreme Court, the Attorney General argued strongly that economists support carbon pricing because it's the most cost-effective way to reduce emissions. They cited my own testimony before the finance committee of this House to support that claim, so I have to stick with that.

The cost-effectiveness of carbon pricing comes from applying the same price to a whole set of emissions—to as many emissions as you can.

With that in mind, I would ask two questions.

First, would we want more stringent policies applied on some sectors than on others?

Second, even if we did, do we need another mechanism or another policy to do so?

My answer to both of these questions is no.

I say we do not need more stringent policy on one sector than others and we do not need new policies, even if that is what we choose to do. Carbon pricing gives us all the tools we need.

That emissions in one sector are more resilient to carbon pricing is indicative that there is more value there per tonne of carbon emitted, which is what carbon pricing drives our economy towards. The judgments about whether that value will be present in the long term are generally not best made by governments. But, if government chooses to do so, Parliament has the means to ensure that carbon prices are reflective across the investment, production, export and combustion decisions related to hydrocarbons.

The carbon pricing regulation is there. The clean fuel regulations, the Bill C-69 measures and the tax code are all there.

In conclusion, if this proposed oil and gas cap is just an expression of what we expect policies to bring, so be it, but I question the need for and the efficacy of a new regulatory mechanism.

Thank you. I'm sorry for being 10 seconds over.

[The Chair, Liberal, John Aldag]

Thank you, Mr. Leach. It's all good. There's a lot to think about there.

Ms. Winter, we'll now go to you for five minutes.

[Dr. Jennifer Winter, Associate Professor, University of Calgary, As an Individual]

Good afternoon. Thank you for inviting me to appear before the committee on this very important issue. It is a privilege to speak to you today.

I'm an economist, and my research expertise is energy and environmental policy. I focus on climate change policy and in particular, emissions reduction policies and their effects on households and emissions-intensive and trade-exposed industries. I draw on this expertise in speaking to you today.

Canada faces a challenge in reducing emissions and simultaneously protecting the quality of life and economic growth that we enjoy. I strongly support implementing increasingly stringent policies to meet Canada’s commitments under the Paris Agreement. At the same time, adaptation to and mitigation of climate change is a complex problem, and the various policy solutions should be weighed very carefully. My comments today reflect both my support for emissions reductions and my desire to see thoughtful climate policy design that maximizes benefits and minimizes costs to Canadians.

From a global perspective, as well as for Canada’s Paris commitments, the source of emissions does not matter. A tonne is a tonne is a tonne, regardless of whether the emissions come from Nova Scotia or Alberta, from home heating or oil and gas production, and yet, as numerous witnesses at this committee have noted, the oil and gas sector is a significant contributor to Canada’s emissions. The sector’s emissions must decline in order for Canada to meet its 2030 and 2050 emissions reduction targets. This is the case for all parts of the Canadian economy, including households.

The important question facing this committee and the government is whether a cap on oil and gas emissions is necessary to achieve the desired emissions reductions. Specifically, what policy problem does the cap solve? I respectfully submit that the government already has the necessary policy tools at its disposal, and that a cap on oil and gas emissions would unnecessarily damage the Canadian economy. My concern is fourfold.

First, a sector-specific emissions cap overlaps with existing policy. Emissions pricing, whether the federal backstop or provincial or territorial systems, creates incentives for emissions reductions in both the demand and supply sides of the economy. On the demand side, the emissions price increases the cost of fossil fuel-based energy sources like gasoline and emissions-intensive goods and services. The emissions price lowers demand for these products by incenting changes in consumption patterns. On the supply side, emissions pricing increases the cost of production, incenting changes in production processes to avoid the price.

Moreover, the proposed clean fuel standard creates a market for emissions reduction credits, further incentivizing emissions reductions across the Canadian economy. This market ensures firms receive a return for investments in emissions reductions beyond avoiding paying the emissions price.

Given that these two policies are already in place, a cap on oil and gas emissions adds little to Canada's tool kit and is potentially more costly than beneficial, which leads me to my next concern.

Differential treatment of a specific sector reallocates capital and labour throughout the economy, moving these production inputs away from their most productive use. This artificially expands some sectors, shrinks others and lowers Canada’s productivity.

Third, and relatedly, differential emissions prices, either implicit or explicit, in different sectors mean some firms engage in more costly emissions reductions than would otherwise be the case. This results in more costly emissions reductions overall, increasing the cost of meeting Canada’s targets.

Fourth, an emissions cap for the oil and gas sector adds complexity in an already complex climate space. Canada already has differential prices via different provincial, territorial and federal systems, and adding an additional regulatory cap exacerbates this complexity. A cap on emissions would be administratively costly for the government and adds to the compliance burden for firms, increasing their costs. It needlessly complicates the Canadian climate policy landscape. Moreover, it moves us away from a consistent approach to emissions pricing across Canada.

Given these concerns, a direct approach is a more appropriate, easier and less costly way to reduce oil and gas emissions. This could include reducing output, increasing the stringency of the emissions price or reducing the output subsidy that emissions-intensive and trade-exposed sectors receive.

To conclude, I have three main points. First, there is nothing special about oil and gas emissions; a tonne is a tonne is a tonne, and prices should apply uniformly to all sectors. Policy that ensures consistency in emissions pricing across the economy is vastly preferable to special treatment of one sector.

Second, Canada already has the necessary policy tools in place to reduce emissions from all sectors of the economy. The question is whether the existing emissions price is sufficiently stringent to meet these targets and sends a long-term signal to firms to invest in large-scale and expensive emissions reductions.

Third, using existing policy mechanisms avoids complexity and unnecessary and higher costs for the same emissions reductions.

Thank you for your time. I look forward to answering your questions, and I apologize for going over time.

[The Chair, Liberal, John Aldag]

Thank you for your opening statements, Ms. Winter. I'm sorry to have rushed you at the end. There will be lots of time for discussion.

We're going to Environmental Defence Canada. I believe that Mr. Marshall is going to be providing the opening statement.

If that's correct, Mr. Marshall, it's over to you. You have five minutes.

[Dale Marshall, Manager, National Climate Program, Environmental Defence Canada]

Thank you, and thanks for the invitation.

I'm joining from the unceded territory of Algonquin Anishinabe peoples, also called Ottawa.

I'd like to start with today's report from the Intergovernmental Panel on Climate Change, which frankly paints a terrifying picture of our future if Canada and the world doesn't tackle fossil fuels with the urgency needed.

The report states:

“The scientific evidence is unequivocal: climate change is a threat to human well-being and the health of the planet. Any further delay in concerted global action will miss a brief and rapidly closing window to secure a liveable future”.

The blind spot in climate change for Canada for 30 years has been the oil and gas industry. While other sectors have reduced greenhouse gas emissions, oil and gas companies massively increased their production and emissions, and emissions from Canada's fossil fuel exports are increasing even more rapidly and are now greater than Canada's total greenhouse gas emissions. Now, however, Canada has an opportunity to shine a light on that blind spot and to address the root cause of climate change: fossil fuel production and use.

Prime Minister Justin Trudeau committed to cap oil and gas emissions today and to ensure that they decrease tomorrow at a pace and scale needed to reach net zero by 2050. This will be the defining moment for the Prime Minister's legacy on climate change.

The oil and gas lobby will attempt to weaken, delay or kill this policy because it disrupts their business model of pumping more and more fossil fuels into the global market and more and more carbon emissions into the atmosphere.

Many companies, including the major oil sands companies, have actually pledged to reach net zero by 2050, the goal of this policy, so why have so many oil executives already opposed it? Pure greenwashing. Their net-zero plans are vague and weak, with far-off promises, loopholes to allow emissions reductions from other sectors and other countries, a reliance on false solutions for the oil and gas sector, like carbon capture and storage and blue hydrogen, and an expectation that Canadian governments will hand over $50 billion or more in subsidies to realize them.

The Prime Minister must not blink from the inevitable pressure and hostile attacks from big oil's lobby and PR machine. The IPCC noted that misinformation and active resistance to climate action from the oil and gas industry have made us more vulnerable. It's time for the federal government to act in the interest of all Canadians.

Capping oil and gas emissions is a key part of this, but to do so, the government must do the following:

One, set hard caps for 2025 and 2030 that represent the oil and gas sector's fair share of emissions reductions. For 2030, that's a 60% reduction below 2005 levels, or 65 million tonnes.

Two, include all emissions from the production and use of oil and gas. Addressing only production emissions means ignoring 80% of the problem.

Three, deny subsidies and loopholes to oil and gas companies. The polluter pays principle must apply here. Canadian oil and gas companies will make $200 billion in profits in 2021 and 2022, and yet they shamelessly go to Canadian governments, cap in hand, asking for corporate welfare to reduce emissions.

Four, put people first. The oil and gas cap must be aligned with a full and sincere implementation of the UN Declaration on the Rights of Indigenous Peoples and a fair, managed and government-funded transition for workers and communities.

These are ambitious caps that we're calling for, but they are possible, and they are appropriate, so how can these caps be met? In addition to placing a hard cap using the Canadian Environmental Protection Act, there are four complementary actions that the federal government should take.

First, stop approving new oil and gas projects. Economic attrition would shrink Canadian oil and gas production by over 30% this decade and reduce carbon emissions commensurate with that. That includes the offshore oil project Bay du Nord, which will be a carbon bomb for the planet.

Two, strengthen methane regulations immediately. At least 20% of GHG emissions from oil and gas facilities are in the form of methane, and yet reducing those is very cheap. Today, methane from oil and gas can be reduced by 88% at less than $25 a tonne.

Three, call the industry's bluff on emissions intensity. The industry has committed to getting to net zero by 2050. If that were achievable, then emissions intensity should improve considerably in this decade.

Four, remain steadfast on a hard, enforceable cap, with still penalties for non-compliance. If the other three measures aren't enough for the oil and gas sector to do its fair share of emissions reductions, then companies will have to curtail production. The alternative is to let companies escape responsibility and impose catastrophic impacts on the rest of us.

This is a critical test for the Prime Minister. Despite the progress on climate policy in recent years, Canadian greenhouse gas emissions remain unacceptably high. The Prime Minister must remain steadfast in the face of the inevitable ferocious attacks from the oil and gas lobby and put into place robust regulations to curb pollution from Canada's biggest polluters.

[The Chair, Liberal, John Aldag]

Thank you for your opening comments.

Now we're going to TC Energy Corporation.

Who's going to do the opening comments?

[Robert Tarvydas, Vice-President, Regulatory Strategy, TC Energy Corporation]

I'll be making the opening statement, Mr. Chair.

[The Chair, Liberal, John Aldag]

You have five minutes. Please proceed as soon as you are ready.

[Robert Tarvydas]

Thank you, Mr. Chair.

Hello and good afternoon, committee members.

TC Energy recognizes the important work this committee is doing to seek out and listen to a wide range of perspectives on the development of an oil and gas emissions cap, and we appreciate the invitation to share our views. With over 65 years of experience, TC Energy is a leader in the responsible development and reliable operation of North American energy infrastructure.

We recognize the importance of addressing climate change and a significant undertaking to transition Canada's economy for a low-carbon future. In October 2021, we announced new targets to reduce the GHG emissions intensity from our own operations by 30% by 2030 and are positioning the company to achieve net-zero emissions from our operations by 2050. We support the goals of the Paris Agreement and are ready to undertake the critical challenge before us as we move to a low-carbon future.

We know a strong climate change policy will take a collective effort amongst industry, government, communities and consumers to achieve meaningful emissions reductions. As government considers the scope for an oil and gas emissions cap, we believe the desired policy intent can be achieved by focusing solely on direct GHG emissions occurring within oil and gas industry operations.

Focusing on scope 1 emissions adheres to the principle of environmental responsibility and liability, which forms the foundation of environmental regimes in Canada and internationally. Moreover, focusing solely on scope 1 emissions will help avoid double counting, regulatory and decarbonization inefficiencies, negative energy security and economic impacts, and implications to cross-jurisdictional collaboration, both interprovincially and internationally. In doing so, government can utilize existing complementary levers, such as carbon pricing, methane regulations, clean electricity standards and clean fuel regulations to achieve the desired emissions reductions objectives in the most efficient and cost-effective way for industry and consumers.

We see numerous opportunities to decarbonize our own pipeline operations in both the near and long term. Asset modernization will help reduce vented and fugitive methane emissions associated with regular operations and maintenance and improve overall operational efficiency. We've already achieved notable operational emissions reductions through turbine retrofits.

To address methane emissions. we recently piloted a field trial of a zero-emissions vacuum compressor during inline inspection. We intend to reduce our carbon footprint by converting gas compressor stations to electric motor drives, and to decarbonize our power consumption by sourcing renewable and low-carbon power. Renewable natural gas and hydrogen blending opportunities will further reduce our emissions profile.

In Quebec, TC Energy has transported renewable natural gas from two landfill sites since 2002 and helped advance the province's standards for biomethane transportation. Through the Alberta carbon grid, TC Energy will play a key role in deploying carbon capture utilization and storage technology. We are actively developing and deploying advanced software and systems to enhance our ability to monitor and track emissions across our systems.

Government must ensure that industry's ability to adhere to an oil and gas emissions cap is achievable and economically efficient. The inability for the oil and gas sector to cost-effectively decarbonize to the levels required by an overly restrictive emissions cap would effectively create a cap on production, with irreversible impacts on energy security, reliability and affordability. This would significantly impact both Canada's economy and balance of trade, while having a negligible impact on global emissions as production moves to jurisdictions with inferior ESG profiles.

For context, the Canadian oil and gas sector provided $105 billion to Canada's GDP while supporting nearly 400,000 jobs in 2020. Commodity price recovery since 2020 will significantly increase this figure in the years following. Inefficient cap implementation would jeopardize the sector's key contribution to both national jobs and GDP, while negatively impacting energy affordability for other industrial sectors and Canadian consumers.

A healthy oil and gas industry is also needed to allow industry to support economic reconciliation priorities and financial opportunities for indigenous groups. At TC Energy, we want the future of Canadian energy development to be more equitable and inclusive for indigenous peoples and communities, and we are taking action to contribute to lasting change through our own reconciliation action plan. Projects like Coastal GasLink are providing significant benefits to indigenous communities, with over $1 billion in contract awards to indigenous businesses or their joint venture partner businesses.

Thank you for providing me the opportunity to provide you with TC Energy's overarching perspective. I'll be glad to address any questions you may have at the appropriate time.

[The Chair, Liberal, John Aldag]

Thank you for your comments.

Our last opening statement will be from Institut de l’énergie Trottier, with Mr. Langlois-Bertrand.

I'll turn it over to you, for five minutes.

[Dr. Simon Langlois-Bertrand, Research Associate, Trottier Energy Institute]

Thank you for inviting me and giving me the opportunity to provide information on this very important topic. I hope you'll find it useful as you consider this measure.

I will be making my opening statement in English, but I'll be happy to answer questions in the language in which they are asked.

The remarks I'm making here are based on two sets of work. The first is the extensive modelling work we did as part of our Canadian energy outlook, which we publish every few years. It assesses trajectories to meet differentiation reduction targets, including the current 2030 and 2050 targets. The second set of work is sectoral analysis that we do for the shorter term, including more recent trends and how actors are moving at the moment.

When considering the cap, to get to the 2030 GHG reduction target of 40% to 45% compared with 2005 levels, which is to say, roughly, today's emissions levels, Canada needs 5% year over year reductions for the entire economy. To achieve this short-term target, it's necessary to focus on sectors where deep emission reductions are possible in the shorter term, while at the same time, initiating changes in other sectors where short-term reductions are more challenging.

Meeting the 2030 target means that the government must focus on sectors that can transform deeply in less than a decade. At the same time, they can delay starting the broader changes needed for the 2050 net-zero goals in sectors that will move more slowly. The correlator to this is that for some sectors, it's very difficult to foresee a 40% to 45% reduction by 2030. This can be due to cost, for instance, in sectors where technology is in earlier stages of development, like heavy transport. This can also be due to technological challenges such as in some industrial processes where no carbon alternative exists at the moment.

For these reasons, the 2030 short-term target must be considered with care and implies the identification of these differences across the entire economy. With this in mind, most substantial reductions to achieve the 2030 target should come from the oil and gas sector. This is both the cheapest way to meet a country-wide target and the most straightforward. In our modelling, we estimate the need at more than 60% of emissions reduction for the sector compared with today's levels, and that's assuming that all other sectors are perfectly successful in their own reductions.

Although these reduction levels are certainly massive, it's important to note that not reducing emissions from oil and gas production by that extent means that other sectors will have to compensate in order for the economy to meet the 2030 target, which means that more expensive and, in some cases, more technologically challenging transformations will be needed elsewhere, for instance, in other industries, in the transport sector and so on. This is not to say that deep and rapid reductions in emissions from oil and gas production can substitute for substantial measures as part of the policy portfolio for other sectors. Rather, it's essential to understand that the 2030 target cannot be achieved without a deep transformation in the oil and gas sector.

In terms of the cap, a hard cap on emissions for the sector could be implemented in a variety of ways and can lead to transformations of different forms, as previous speakers have noted. It includes limits to production levels and, of course, also a very rapid ramp-up in improvements to emissions intensity, carbon capture and storage where it may be economical, and so on. The important thing to remember is that imposing this cap for the industry, through a cap and trade system for instance, could let producers and refiners decide how to meet their obligations.

Importantly, the theoretical effect of the cap is to drive innovation and investment—at least that's the idea—but whatever the means to meet the cap, CCS or whatever else, as long as the reductions are there, perhaps that's the most important thing.

Perhaps as importantly, the imposition of a cap with a clear schedule for reductions has the benefit of contributing to eliminating one of the key barriers to transformation across all industries, which is the policy uncertainty surrounding the climate pledges. To initiate the investments and encourage the innovation needed to achieve our climate targets, industry actors need a stable investment environment, and a stringent cap on emissions from the most emissions-intensive sector would certainly be an important stepping stone in doing this.

Although it's not limited to choosing to impose a cap or not in order to reduce emissions, given the depth of the transformation that we're talking about here and the fact that part of this industry may need to reduce production to meet the cap, any measure should be accompanied by support to offset any negative economic impacts from decarbonization on communities and workers, proportional, hopefully, to the economic disruption caused by meeting specific targets.

[The Chair, Liberal, John Aldag]

That's excellent.

Thank you, everybody, for your opening statements.

Just before we get into our rounds of questions, we've received a notice, since the meeting started, from the procedure and House affairs committee that a change to our committee has been formalized. With that I'd like to officially welcome Mr. McLean and Mr. Bragdon, who will now be regular members of our committee.

Welcome. Mr. McLean, I know you've been here before, so welcome back.

[Greg McLean, Conservative, Calgary Centre, AB]

Thank you, Mr. Chair.

Thank you, as well, to my fellow members.

[The Chair, Liberal, John Aldag]

Mr. Morrice, I would also like to acknowledge that you're here and joining us once again. It's good to see you as well.

We're going into our rounds of questions. Each of the first four members will have six minutes.

For the witnesses, I know some of you have been here before. For those who are here for the first time, I very much let the members control their time. They will decide who they're going to ask questions. If you have something, you can try raising your hand, but it will be up to the member to decide if they want to go there or if they want to pursue their own line of questioning. Sometimes they can be a bit short, just because they have a limited amount of time and want to get through as much testimony as they can.

With that, we'll get started.

Mr. Melillo, I believe you're up first. It's over to you for six minutes.

[Eric Melillo, Conservative, Kenora, ON]

Thank you very much, Mr. Chair.

I want to thank all of our witnesses for taking the time to join us today and to have a conversation about this important topic.

I would like to start with the folks from TC Energy, whoever is going to answer.

In your opening remarks you talked a bit about economic reconciliation. It's obviously an important principle for all the industry we have across the country. It's important in my riding and, of course, for oil and gas as well.

This is a bit of a broad question to start off with, but I'm just wondering if you could speak about the importance of economic reconciliation and the impacts oil and gas projects can have on first nations, particularly in western Canada.

[Robert Tarvydas]

I can, certainly, and thank you for the question.

Mr. Chair, one of the defining factors of the oil and gas industry is that a lot of the activity takes place in fairly remote places in Canada, which also happens to be where a lot of indigenous communities are located. In some circumstances, participating economically in the development of energy in Canada provides some of these communities with one of the few opportunities they have for economic participation. As the development has occurred in some of these communities, they have actually had opportunities to participate meaningfully through both contracting and direct employment.

If there were a decrease in the development of energy in those places, then you would see a concurrent decrease in the opportunities for indigenous communities to participate in the development of energy and also fewer opportunities.

[Eric Melillo, Conservative, Kenora, ON]

Thank you. I appreciate that.

Again, I have limited time, and I don't mean to cut you off, but I'm trying to get in as many questions as I can.

I'll come back to you as well, because I know the oil and gas sector specifically has done a lot of work to innovate and to find ways of doing things more sustainably and in a more environmentally friendly way. Again, this is another broad question for you. Could you chat a bit about some of the work that your organization has done to ensure that production is innovating and is as environmentally sustainable as possible?

[Robert Tarvydas]

Just to be clear, we are a midstream company, so we actually don't produce any oil and gas ourselves. We are primarily a transportation company and a power company.

I can talk very briefly, though, to the fact that we participate with a number of universities and industry associations and we fund a number of R and D initiatives to make sure that things like emissions monitoring and methane monitoring are done as efficiently as possible and that we're pushing the bounds on those all the time.

[Eric Melillo, Conservative, Kenora, ON]

Thank you very much for the answer. I appreciate that.

Obviously, as well, there's been a discussion in the last week or so about what's happening in Europe with Russian aggression and the horrible war we're seeing now in Ukraine. I think it's really sparking a conversation across the country about Canada's ability to be more energy independent and to produce more here at home.

On Twitter, the Prime Minister has actually said that he plans to ban all imports of Russian crude. I don't know whether my colleagues across the way can confirm that for me, but I think that's definitely a positive step our country should take. Again, it goes back to how important it is that we're supporting Canadian industry here.

Can I get your thoughts on how an emissions cap might impact projects in Canada if it's on production broadly rather than on emissions specifically?

[Robert Tarvydas]

Mr. Chair, the very nature of energy security, of course, is very much top of mind given the events unfolding, unfortunately, in eastern Europe right now, as is often the case. Yet we also saw the United Nations report come out currently, which paints this very bleak picture of a climate change future.

I think it is, though, possible for the oil and gas industry to continue to produce with some of the technologies out there, like carbon capture and storage and direct capture from the atmosphere. I don't see that keeping production the same or increasing production is completely incompatible with meeting emissions goals.

I'd say again that it depends on the policy outcome you want. Are you trying to reduce emissions or are you trying to reduce production by the oil and gas industry? I think that designing an emissions cap inappropriately could have unintended consequences, specifically reducing the production of oil and gas when it may not be necessary to do so if emissions reductions are ultimately your goal.

[Eric Melillo, Conservative, Kenora, ON]

Would you have any worries or any reservations that an emissions cap could ultimately result in carbon leakage?

[Robert Tarvydas]

Well, as I said in my opening statement, I think it is a very real possibility that a hard emissions cap that results in a production cap or, effectively, a cap on production or even a decrease in production would likely result in leakage to other jurisdictions with environmental standards that are perhaps not as strict as Canada's.